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Closing Out the Year With a Warning:
More to Come
By Betty Booker, Times-Dispatch Columnist
December 26, 2005
Contact Betty Booker at (804) 649-6805 or bbooker @timesdispatch.com
Plan on retiring someday? Maybe someday soon?
Been paying into Social Security and Medicare so they're there when you need them? Noticed how when your company projects your pension plan income, it includes your Social Security benefit to make it seem larger?
Been squirreling money in your 401(k) mutual funds and company stock?
Well, make alternative plans to hedge your bets. Some retirement protections you're counting on may be in jeopardy.
You have a choice about this bad news: Pretend it will go away, or learn what's happening, put your dukes up and fight.
Here are trends that lead to a visceral sense that something is out of whack:
Social Security privatization is not going away, no matter how many pols and pundits say the matter is dead.
Two-thirds of retirees depend on Social Security for more than half their income. Opponents haven't stopped bad-mouthing and fighting it, although it has been well-run and effective since it was enacted in 1935.
It would be crafty political strategy to let people believe that investing part of their Social Security contributions in "private accounts" is a moribund issue because there aren't enough votes to pass it now.
But midterm elections are next fall. Seniors vote in hefty numbers.
They overwhelmingly oppose private accounts. They sent that message via their representatives at the just-ended White House Conference on Aging.
Yet privatized accounts topped last year's State of the Union wish list. You think that 75-year goal was blown away by Katrina? Even as Hurricane Rita bore down on Texas, privatizers were discussing the issue in Washington, according to For Our Grandchildren, a conservative group supporting privatization.
Meanwhile, pensions are eroding, morphing, freezing and ending fast.
Standing in harm's way are low-and middle-income workers, whose average pay at the nation's 367 largest companies was $27,460 last year. CEOs don't have to worry about their retirement: Their average take-home pay in 2004 was $11.8 million.
More than half of workers have no pensions. In the past 20 years, the number of companies with traditional defined-benefit plans has fallen from 114,000 to 32,500. Some 41 million private-sector workers plan on getting those benefits. That's about 21 percent of American workers, according to the Bureau of Labor Statistics.
Companies are phasing out such plans by a variety of tactics:
Some plans are "frozen" so no more money is added for retirement benefits, which then erode in value as time passes. New hires are locked out of future guaranteed defined benefits.
Other companies switch to defined-contribution plans, like 401(k)s, where your contributions are invested in funds you usually choose from limited company selections, including company stock. These have more risk to workers.
And some want to convert traditional pensions to cash balance plans -- essentially reneging on promised monthly pensions. Instead, they pay workers the amount they have on hand to fund the pension and let them invest that lump sum themselves. This hurts mature workers more than younger ones, who have decades to grow savings.
Word of advice for 2006: Watch news programs that cover in depth all sides of the major news of the day. Read your newspaper and online pension and government watchdogs, such as www.pensionrights.org. And keep an eagle eye on your elected officials.
Contact staff writer Betty Booker at bbooker@timesdispatch.com or (804) 649-6805.
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